The phrase is said in the song "Lucy in the Sky with Diamonds" by the Beatles. When looking into a kaleidoscope, it seems as if the world turns into many different colours and swirls and reality doesn't seem real anymore. This is what happens in an LSD or Acid trip. The song is about this happening to Lucy. When someone says a person has kaleidoscope eyes, it means they're 'tripping' (hallucinating) on Acid.